WTI Dips’n’Rips As Algos Panic Over Inventory Report

WTI has soared since last night’s API-reported surprisingly-large crude draw (Oct above $67), but is falling back after DOE reported bigger than expected inventory builds at Cushing and in Gasoline and Distillates (despite a crude draw).

Bloomberg Intelligence Energy Analyst Fernando Valle notes that peak summer driving season may be shrinking in the rear-view mirror, but U.S. refineries are running like it’s the Fourth of July as the availability of cheap crude and wide margins encourages them to keep pumping out petroleum products. Export markets will have to absorb that output to keep margins wide. Gasoline looks particularly vulnerable, with the upcoming switch to winter grades likely to force a sell-off.

API

Crude -5.17mm (-2mm exp)

Cushing +195k (+900k exp), Genscape +519k

Gasoline -930k (-500k exp)

Distillates +1.8mm (+1.5mm exp)

“The API inventory data published after close of trading yesterday are lending buoyancy to prices this morning,” said Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt. “Thus the official inventory data this afternoon are also likely to show a more marked inventory reduction.”

DOE

Crude -5.84mm (-2mm exp)

Cushing +772k (+900k exp), Genscape +519k

Gasoline +1.20mm (-1.05mm exp)

Distillates +1.849mm (+1.5mm exp)

Having flip-flopped between draws and builds for the last six weeks, crude inventories were expected to draw this week and did moire than expected and more than AP reported. However, Cushing stocks increased for the second week in a row and distillates and gasoline saw bigger than expected inventory builds.

Cushing stocks are rebuilding…

Production increased last week to 11.00mm (remember this now rises and falls in 100k increments only)…

A draw could “reignite concerns of a tightening global oil market place,” Phil Flynn, senior market analyst at Price Futures Group, says, and from last night’s API print, it did but the bigger than expected Cushing and product builds stalled the gains…

But then the machines stepped in…

Overall the market is still down about 10 percent from earlier this summer on concerns surrounding the U.S.-China trade war and potential fallout from Turkey’s economic crisis.